Any asset you possess needs to be disclosed during the bankruptcy process. That also means that any inheritance you receive needs to be mentioned to the court. If you inherit money within a certain timeframe, a New City bankruptcy attorney from our firm can tell you what should be done and if it will have to be used to pay off debts.
Do I Tell Creditors If I Inherit Money?
If you inherit money within 180 days of filing for bankruptcy, you have to make that known. The usual process is notifying your bankruptcy trustee so that they can figure out if anything about your bankruptcy plans needs to change.
It’s important to mention that when you receive the money is not important. The date the deceased person dies is considered the date you inherit the money, even if you will have to wait for a little while before it is released to you.
Will I Have to Spend Any Money I Inherit?
Unfortunately, it is likely that any money you inherit will go towards paying off your debt. If you file for Chapter 7 bankruptcy, whatever money you inherit will be considered one of your assets and could be liquidated to pay down debts. You might be able to use an exemption for it, but it’s not a sure thing.
For those filing Chapter 13 bankruptcy, the inheritance is likely to affect your payment plan with your creditors. In this type of bankruptcy, filers make a three-to-five year payment plan that they can afford. The creditors may not get paid back completely, but they get a significant chunk of what they’re owed. If they know about an inheritance, it’s likely that they’ll want more money from you. You have more assets, so you’ll have to pay more.
What If My Spouse Receives Money?
When your spouse is the one to inherit money, you need to make sure that it is not mixed with your shared funds. Do not deposit it in a joint bank account or do anything else that can make it look like an asset that you and your spouse share. As long as you do that and you are filing for bankruptcy on your own, your spouse’s inheritance should not be touched.
What If I Hide My Inheritance?
Obviously, it’s not ideal to receive an inheritance during the bankruptcy process. However, trying to hide such an asset is a terrible idea. Your case will probably be dismissed without your debt being addressed, but that could be the least of your worries. You could face charges of fraud or perjury as well.
Talk to a Bankruptcy Attorney
If you have any questions about the bankruptcy process, we want to hear from you. Contact the Lauterbach Law Firm and ask to schedule a consultation with our team. We’re ready to help you figure out if this is your best option for a fresh financial start.
